Emerging Trends in Real Estate® Global Outlook 2022
Report Summary: : Just as everyone dared to hope that the pandemic is receding, Russia’s invasion of Ukraine has set off a new wave of apprehension across the world along with fears of a wider conflict.
The invasion is having devastating consequences for the people of Ukraine, and there is no clear outcome for this humanitarian crisis nor for the global response to Russia through economic and financial sanctions.
From a capital markets perspective, attention has dwelled on the immediate effect of the conflict on already surging energy prices, leading inevitably to inflation lasting at higher levels for longer. At the very least, the “economic war” will slow global growth in 2022.
For real estate, there is much uncertainty. A huge release of pent-up demand led to record volumes of investment transactions as economies reopened during 2021. That level of activity never looked likely to be repeated this year. Even before the invasion, industry leaders canvassed for Global Emerging Trends were scaling back their expectations. Central banks, led by the Federal Reserve in the US, had been planning to tighten monetary policy to keep inflation in check, but there is now a question over whether this will continue in Europe. Supply chain disruptions, already a big problem, could get worse.
The industry still clings to the familiar pro–real estate investment criteria — property as an inflation hedge and the premium between yields and interest rates — but with serious concerns over how long they remain in place. The risk is that inflation spirals outside the influence and control of the central banks.
The outlook for real estate is not just dependent on the direct effects of Russia’s invasion of Ukraine on global economies but also on how the conflict will hit confidence among consumers, businesses (or occupiers) and investors. Against those unknowns, property deal-making is expected to slow down, especially in Europe.
There are other potential implications for real estate from the prevailing uncertainty in terms of intensifying existing trends. The industry is already paying far closer attention to detail in asset management than in pre-pandemic times. Some investors are thinking more about diversification in investment strategies — spreading risk across sectors and geographies, which may well see already strong capital flows from the West to Asia Pacific gather momentum.
Some operational real estate sectors have won wide and growing support across the industry, partly because they are contra-cyclical and offer more of an inflation hedge than mainstream sectors. It remains to be seen whether demand for such assets will become even stronger during the economic fallout from Russia’s invasion of Ukraine.
In any event, when it comes to deployment, real estate investors can redirect capital or turn off the tap altogether. Far more difficult questions arise around other, longer-term capital expenditure commitments, not least those relating to COVID-19. The industry is once again facing an economic slowdown while struggling to come to terms with long-term structural trends reinforced or accelerated by the pandemic.
A key difference this time is that industry may also have to deal with the consequences of very swift changes in government spending in favour of defence and energy policies and away from the areas that directly affect real estate, such as infrastructure and housing.
Above all, how will the current crisis influence the environmental, social and governance (ESG) agenda? The pandemic has already reinforced the importance of ESG for everyone in real estate. If anything, the interviews for Global Emerging Trends indicate even greater concerns this year around capital and operational expenditure as well as the risks associated with making real estate fit for purpose in all aspects of ESG.
As we explore in Chapter 2, equity investors have stepped up their game and are leading the way when it comes to directing capital towards decarbonising real estate whereas lenders have been mostly following. There is much more to be done by lenders and regulators if the industry is to meet its targets.
But there is now great uncertainty about whether the surging energy costs resulting from the Ukrainian crisis will speed up or undermine the global transition from fossil fuels to cleaner energy sources to fight climate change. The danger is that high prices will spur further investment in oil and gas production, at least in the short term, just as they did in previous crises. For the longer term, the hope is that acute problems of energy security will act as a wake-up call to governments about the radical economic transformation they need to implement under the ESG agenda.
Report Summary: Just as everyone dared to hope that the pandemic is receding, Russia’s invasion of Ukraine has set off a new wave of apprehension across the world along with fears of a wider conflict.
The invasion is having devastating consequences for the people of Ukraine, and there is no clear outcome for this humanitarian crisis nor for the global response to Russia through economic and financial sanctions.
From a capital markets perspective, attention has dwelled on the immediate effect of the conflict on already surging energy prices, leading inevitably to inflation lasting at higher levels for longer. At the very least, the “economic war” will slow global growth in 2022.
For real estate, there is much uncertainty. A huge release of pent-up demand led to record volumes of investment transactions as economies reopened during 2021. That level of activity never looked likely to be repeated this year. Even before the invasion, industry leaders canvassed for Global Emerging Trends were scaling back their expectations. Central banks, led by the Federal Reserve in the US, had been planning to tighten monetary policy to keep inflation in check, but there is now a question over whether this will continue in Europe. Supply chain disruptions, already a big problem, could get worse.
The industry still clings to the familiar pro–real estate investment criteria — property as an inflation hedge and the premium between yields and interest rates — but with serious concerns over how long they remain in place. The risk is that inflation spirals outside the influence and control of the central banks.
The outlook for real estate is not just dependent on the direct effects of Russia’s invasion of Ukraine on global economies but also on how the conflict will hit confidence among consumers, businesses (or occupiers) and investors. Against those unknowns, property deal-making is expected to slow down, especially in Europe.
There are other potential implications for real estate from the prevailing uncertainty in terms of intensifying existing trends. The industry is already paying far closer attention to detail in asset management than in pre-pandemic times. Some investors are thinking more about diversification in investment strategies — spreading risk across sectors and geographies, which may well see already strong capital flows from the West to Asia Pacific gather momentum.
Some operational real estate sectors have won wide and growing support across the industry, partly because they are contra-cyclical and offer more of an inflation hedge than mainstream sectors. It remains to be seen whether demand for such assets will become even stronger during the economic fallout from Russia’s invasion of Ukraine.
In any event, when it comes to deployment, real estate investors can redirect capital or turn off the tap altogether. Far more difficult questions arise around other, longer-term capital expenditure commitments, not least those relating to COVID-19. The industry is once again facing an economic slowdown while struggling to come to terms with long-term structural trends reinforced or accelerated by the pandemic.
A key difference this time is that industry may also have to deal with the consequences of very swift changes in government spending in favour of defence and energy policies and away from the areas that directly affect real estate, such as infrastructure and housing.
Above all, how will the current crisis influence the environmental, social and governance (ESG) agenda? The pandemic has already reinforced the importance of ESG for everyone in real estate. If anything, the interviews for Global Emerging Trends indicate even greater concerns this year around capital and operational expenditure as well as the risks associated with making real estate fit for purpose in all aspects of ESG.
As we explore in Chapter 2, equity investors have stepped up their game and are leading the way when it comes to directing capital towards decarbonising real estate whereas lenders have been mostly following. There is much more to be done by lenders and regulators if the industry is to meet its targets.
But there is now great uncertainty about whether the surging energy costs resulting from the Ukrainian crisis will speed up or undermine the global transition from fossil fuels to cleaner energy sources to fight climate change. The danger is that high prices will spur further investment in oil and gas production, at least in the short term, just as they did in previous crises. For the longer term, the hope is that acute problems of energy security will act as a wake-up call to governments about the radical economic transformation they need to implement under the ESG agenda.
About Emerging Trends in Real Estate®
Emerging Trends in Real Estate® is one of the most highly regarded annual industry outlooks for the real estate and land use industry, published jointly by PwC and the Urban Land Institute. By incorporating interviews and survey responses from several hundred industry professionals, the report provides an in-depth outlook by region on real estate investment, development trends, and capital markets. The report is produced in four versions: Americas, Asia Pacific, Europe, and Global. All the Emerging Trends in Real Estate® reports published since 2003 are available on Knowledge Finder.
ULI & PWC
Emerging Trends in Real Estate® is jointly sponsored by the Urban Land Institute and PwC. Since 2003, the Urban Land Institute and PwC have collaborated to produce one of the most comprehensive real estate and land use industry reports. PwC is a global network of firms in 158 countries with more than 236,000 people who are committed to delivering quality in assurance, advisory, and tax services. Find out more about PwC at pwc.com.

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